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How Skimping on Accounting Services Can Cost Nonprofits Thousands

Prevent Financial Ruin by Working with Accounting Professionals

Article by Insureon

Nonprofit directors often have big concerns about finances for their organization. Many nonprofits have to run on a barebones budget to dedicate most of their resources to the cause they serve. Unfortunately, this barebones approach can cause some nonprofits to skimp on professional services like accounting and bookkeeping in an effort save money. Here’s why that can end up costing you in the long run.

Prevent Financial Ruin by Working with Accounting Professionals

Many nonprofit directors assume their staff can handle the organization’s finances without any problems. Accounting is pretty much just plugging in numbers in a spreadsheet, right? Not exactly.

People take years of accounting classes in order to be good at their job. While software makes it easy for organizations to track the money that comes in and out of their accounts, good accounting is also about planning for risks, avoiding cash flow problems, and being prepared for financial shocks.

Furthermore, while it will cost you to hire an accountant, many times proper accounting can pay for itself by:

Remember that directors and officers of a nonprofit can be sued for financial mismanagement. Say your organization runs out of cash and you aren’t able to throw your lavish annual fundraising dinner. The directors or officers of the organization can be sued if their decisions led to this oversight.

Managing business cash flow is hard work, especially at nonprofits, which often don’t have steady month-to-month sources of income. If you rely on a few major grants, donor drives, and other big-ticket fundraising events, your organization could find itself just trying to keep its head above water during lean months. The up-and-down nature of nonprofit funds means it’s crucial to have someone with experience watching over your finances.

Tips for Finding a Good Accountant for Your Nonprofit

What should you know about hiring an accountant for your nonprofit? Here are three things to keep in mind...

Accounting firms might do pro bono work. While many businesses balk at donating money to nonprofits, a surprising number are willing to donate time to be involved in your project. Consider asking local accounting firms if they’d be willing to help your business. You might get turned down, but it never hurts to ask.

Look for accountants that have worked with nonprofits before. Because your tax returns are complex and quite different than those of for-profit companies, look for accountants who are familiar with IRS Form 990 and other nonprofit-specific accounting issues.

Be careful to avoid conflicts of interest. Nonprofit directors might be tempted to hire friends and friends of associates who are willing to give them a discount on accounting services, but be careful to avoid any conflict of interests. Say you’ve got a board member whose sister-in-law is an accountant. Is it safe to hire her? Probably not. With your D&O liabilities, it’s best to avoid hiring anyone who has a personal or familial relationship with your board.

One of the biggest challenges nonprofit organizations face today is the ability to recruit and maintain high-quality staff. In 2017, Nonprofit HR reports that 81% of organizations lack a formal retention strategy. With a growing mission-driven market, talent has far more options, making quality employees hard to find and even harder to keep. Outsourcing is a great solution to this problem. The benefits of outscouring talent are many. Cutting out office costs, you can acquire high-quality expertise without the anxiety of retaining employees.

At KSMB Associates, we provide outsourced CFO and accounting services to numerous nonprofit organizations in the Chicago area. For more information on our services, visit us at ksmbassociates.com. Let us be your trusted advisor.

Outsource Your Bookkeeping! - Article by Blue Avocado Magazine

"The most strategic decision you make regarding how to staff your accounting department may be to not staff it at all. Well, at least not with employees of your organization. Outsourced accounting isn't new, but it is getting a second look as nonprofits search for ways to cut office costs." Read more

A well-planned budget can be the difference between long-term financial sustainability or dissolution due to insufficient funding. Not only is it important to have a detailed budget to forecast revenue and spending but it also reveals a larger picture of how your nonprofit operates. This insight will help your financials stay closely connected to your mission.

Why Budgeting is Important for your Nonprofit &How to Do it Properly - Article by Bloomerang

"Understanding what a budget is and its importance is crucial for every organization because it can be a way to achieve financial sustainability. But what is a budget exactly? Some people see it as a forecast, meaning a prediction in the future. Others see it as a target or even a wish list. However, it is nothing similar. A budget is just a financial document that provides an overview of how an organization is planning to spend their money. It must be centered around the primary goals and objectives of the organization." Read more

If your nonprofit is struggling with cash flow or is in need of guidance, we're here to help!

Cash Flow in the Nonprofit Business Model Article

"Cash flow is simply the mix and timing of cash receipts into and cash payments out of an organization’s accounts. It is where the numbers on budget spreadsheets and financial reports translate into the reality of money changing hands. And as such, it is a very specific lens on the reality of a business model—one that takes into account not just whatan organization’s revenues and expenses look like, but when they come and go."Read more

In Illinois there are complex rules and many factors to consider before your audit. This is an important process for your organization as it provides your donors with transparency and builds trust.

Preparing for an audit is a critical step in receiving a successful result for your organization. If you need help preparing for your audit, our trusted advisors are ready to serve you. See below for some resources that will be beneficial for you.

7 Steps To Planning A Successful Nonprofit Audit

"Year-end financial statement audits serve a valuable purpose in helping maintain the financial integrity of not-for-profit organizations so they can successfully complete their missions. These audits can be more effective and less challenging with a little bit of preparation and planning on the part of the not-for-profit management and finance team."Read more

As the spring season approaches, now is a great time to reconnect with your supporters. Whether it's starting a new campaign or conducting surveys for donor feedback, it all comes down to the art of fundraising. Below is an article with some fundraising tips that we found may help you jumpstart the season.

8 Nonprofit Professionals Offer Their Best Fundraising Advice

"Fundraising is an essential activity for any nonprofit organization. Because this involves asking people for donations, rather than exchanging money for a direct product or service, nonprofit leaders need to get donors engaged and emotionally invested in the organization's cause and work. Building and maintaining relationships during a fundraising campaign can be challenging, but with the right strategies, you can create a bond that will last long after a donation has been made." Read More